Welcome to Capstone’s inaugural annual forecast of unappreciated policy and regulatory themes companies, investors, and, industries should expect to play out over the course of the year.

Overview

If you were hoping for a quieter, less contentious, more predictable 2022, we think you’ll be disappointed. On the policy and regulatory front there will be nothing simple or quiet about this year.

We expect 2022 to be a year of action as November’s midterm elections and the Build Back Better Act—which we expect to pass by the end of Q1—drive top priorities of the Democratic legislative agenda.

But the action won’t stop there. After two years of uncertainty, lockdowns, and partisan battles, the pressure is on policymakers to make sure the 2022 outlook is brighter. They have work to do. Across sectors, we expect them to be busy, pushing for a number of regulatory and legislative initiatives that will present underappreciated policy catalysts that companies, investors, and industries should be paying attention to.

Below we walk through 9 underappreciated policy themes we expect this year—beyond Build Back Better. So, buckle your seatbelts and settle in for what promises to be a year of policy catalysts.

Policymakers will pursue aggressive action on the sustainability front in 2022. The specter of a conservative Supreme Court, coupled with upcoming midterm elections, has increased the urgency for climate action while Democrats control Congress. Expansion of sustainability policy will take two forms: 1) a heightened focus on resilience that will extend beyond grid reliability to topics like renewable energy supply chain security, and 2) an intensified focus on sustainability outside of power sector decarbonization that will extend to issues like the presence of “forever chemicals” in drinking water and the decarbonization of gas utilities. Renewables and clean energy will continue to benefit from policy tailwinds, including tax credits.

There will be a significant shift in healthcare coverage enrollment in 2022 from Medicaid to commercial coverage. The shift will produce significant tailwinds for hospitals, namely Tenet Healthcare Corp. (THC) and Community Health Systems Inc. (CYH). Managed care organizations (MCOs) with greater exposure to employer-sponsored insurance and the Affordable Care Act (ACA) exchanges will also benefit from increased membership. MCOs that primarily rely on Medicaid membership, namely Molina Healthcare Inc. (MOH) and Centene Corp. (CNC), will face headwinds as they see reduced membership. 

Congress will likely pass significant bipartisan healthcare legislation in 2022, despite partisan divisions and the upcoming midterm elections. Congress will focus on broadly popular issues such as physician and hospital reimbursement, behavioral and mental health, and pharmaceutical and medical device development. This legislation will create opportunities for physicians and hospitals, home health agencies, diagnostic and device manufacturers, telehealth platforms, and behavioral health companies, but lead to risks for pharmacy benefit managers and skilled nursing facilities.

Capstone believes the Securities and Exchange Commission (SEC) will pursue an aggressive regulatory agenda in 2022 that presents meaningful risks and opportunities for companies across the financial services sector. SEC Chair Gary Gensler has made clear he plans to be a proactive regulator, directing commission staff to review several key areas for potential rulemaking—including market structure, digital engagement practices (DEPs), and the legal treatment of special-purpose acquisition companies (SPACs).  There will be more corporate losers than winners, with broker-dealers and market makers facing the biggest challenges. Gensler is dealing with an ESG disclosure mandate from the Biden administration and pressure from consumer advocates to reevaluate Regulation Best Interest (Reg BI).  

Fintech companies, which have sped their pace of innovation amid the COVID-19 pandemic, will face an accelerated pace of regulation in 2022 as President Biden’s team begins addressing its priorities. Key regulators will push forward two key rulemakings on consumer financial data ownership and small business lending data collection. The CFPB will ramp up efforts to monitor payments innovations and scrutinize the buy now, pay later (BNPL) industry and large tech payment platforms. Regulators will further define what kinds of fintech-banking relationships are appropriate and clarify the scope for fintech bank chartering opportunities.

2022 will be an inflection point for federal regulation of consumer finance companies, with large companies in the Consumer Financial Protection Bureau’s crosshairs. CFPB Director Rohit Chopra will accelerate enforcement & rulemaking after 2021 was marked as the year the CFPB took the least action since 2018. Regulators will focus on equitable treatment by scrutinizing credit reporting practices, loan underwriting, and companies with significant market power.

The Biden administration and Democrat-led federal agencies are ramping up efforts to implement the president’s telecommunications agenda. The Federal Communications Commission will accelerate its efforts to reimpose net neutrality as soon as Democrats gain a majority this year. Agencies will act aggressively to expand broadband service to underserved areas, carving out opportunities for providers that expand service in those areas. Agency disputes will hasten amid disjointed efforts to allocate spectrum on a band that is already saturated with commercial and government users.

Federal agencies—better aligned and staffed up than last year—will be the primary driver of a stricter and more onerous technology regulatory push in 2022, with advancement on antitrust, labor, marketplace platforms, and privacy actions. Department of Justice Antitrust Division Chief Jonathan Kanter and Federal Trade Commission Chair Lina Khan will increasingly work together on an aggressive antitrust enforcement agenda. The Department of Labor and National Labor Relations Board will broaden worker classification standards, expanding their regulatory reach to firms beyond DoorDash Inc. (DASH) and Uber Technologies Inc. (UBER).

2022 will be a pivotal year for shaping crypto regulation as the regulatory environment becomes clearer as regulatory hands will be forced. The Securities & Exchange Commission and other agencies will tackle problems in the rapidly evolving market this year. We expect regulators to progress on establishing rules for stablecoins and harmonizing the treatment of crypto transactions with existing requirements for large cash transactions. Resolution of the SEC’s case against Ripple Labs Inc. and actions forthcoming against DeFi providers—including Uniswap and centralized exchanges such as Coinbase Global Inc. (COIN)—will further define regulators’ tolerance of the industry’s practices. Events, controversies, and company crypto plans will compel regulators to grapple with this burgeoning market as crypto becomes ever more individual investor-facing.